Turkish carmaker Tofas (TOASO) has cut its workforce by 13% compared to the headcount provided in the latest company balance sheet released in November, it has announced.

The number of employees also fell to 4,593 from 5,286 at end-September, suggesting a 15% decline.

The workforce reduction included personnel who have retired and/or have voluntarily resigned as well as employees whose employment contracts have been terminated as part of production planning, Tofas said.

The company will deliver a total of Turkish lira (TRY) 330mn ($9mn) in legally-stipulated compensation payments to the personnel leaving the company.

Problems to continue in coming months

On December 12, CNBC-e published the "agreement for termination of the labour contract" sent by Tofas to the employees in question. In the agreement, Tofas listed the reasons for firing the employees.

The company, citing one reason, complained that local vehicle manufacturers in November 2022 lost an advantage due to a revision of tax brackets for the special consumption tax (OTV/SCT) applied to new vehicle purchases.

According to the updated brackets, local manufacturers’ vehicles apply an 80% OTV. When a 20% value-added tax (VAT) is added on, the total tax reaches 116%.

Problems in competing with imported vehicles (apparently pointing to the recent rise of Chinese vehicles on the market) as well as the cancellation of Tofas export orders were cited as other reasons for the dismissals.

Recession in Europe along with shifts in economic and political conditions on African and Middle East markets have hit Tofas’ export orders.

Finally, Tofas’ contract to produce Fiat Doblo (light commercial vehicle/LCV) vehicles expired in 2023, while its contract for Fiat Fiorino (LCV) vehicles expired in July this year.

Tofas expects the conditions to continue in the coming months.

In decline

In September, BloombergHT reported that Tofas has switched to a single shift in production.

Tofas has an annual production capacity of 450,000 vehicles at its Bursa plant, including 218,000 passenger cars in addition to 232,000 LCVs.

The company increased its capacity to the 0.45mn level in 2017 from 0.4mn in 2016 and its capacity has stayed at that level since then.

Production, meanwhile, peaked at 384,174 units in 2017. It subsequently steadily declined to 239,428 units in 2023.

The company plans to produce a total of 135-145,000 vehicles in 2024 as its LCV contracts have expired. In January-September, it produced 115,087 vehicles, down 34% y/y.

Table: MCV (Fiorino) production declined to 34,723 units in January-September 2024 while Egea (passenger car) production declined to 80,364 units.

The number of Tofas’ employees peaked in 2016 at 10,197 and has steadily declined since then.

Ford Otosan booming

Tofas (TOASO) is a 38:38 JV between Turkey’s Koc Holding (KCHOL) and Stellantis (Milan/STLA).

Tofas’ sister company Ford Otosan, a 41:41 JV partnering Koc Holding (KCHOL) and Ford Motor Company (New York/F), is, meanwhile, booming. 

The company had 10,261 employees in 2016 and the number of its employees steadily increased to reach 17,376 at end-2023.

In 2022, Froto acquired Ford Romania from Ford Group for a consideration of $785mn. The move marked Froto’s first foreign expansion.

In 2023, it launched all-electric and plug-in hybrid Ford Transit Custom (Ford E-Transit) LCV models.

Its Golcuk (Kocaeli) plant in Turkey's Kocaeli Province will become Ford’s commercial EV hub in Europe. Ford Otosan is already Europe’s leading commercial vehicle manufacturer.

The company is also producing an electric version of the Volkswagen Transporter at the Golcuk plant as part of the alliance between Ford Motor Company and Volkswagen Group (Frankfurt/VOW3).

Stellantis fails

Tofas was launched in 1968 as a JV between Koc and Italy’s Fiat to assemble Fiat vehicles in Turkey.

In 2012, Fiat merged with the US’ Chrysler. Fiat Chrysler then merged with France’s PSA (Peugeot, Citroen, Opel) in 2021, forming Stellantis.

Since the merger, Stellantis has not managed to re-organise the company, hitting Tofas.

On December 1, Stellantis CEO Carlos Tavares was dismissed. Currently, the company has no CEO.

Hitting Tofas

In 2022, Stellantis decided to shift Doblo production to Spain.

In 2023, Tofas signed an agreement with Stellantis to acquire Turkey-based Stellantis Otomotiv Pazarlama, which markets Stellantis brands (Peugeot, Citroen, Opel, DS Automobiles, Fiat, Alfa Romeo, Jeep and Maserati) in Turkey for a consideration of €400mn.

With the sale agreement, Tofas and Stellantis also agreed that Tofas would keep producing Fiat Tipo (or Fiat Egea, an identical passenger car model) to end-2025.

Additionally, Tofas would launch production of new K0 LCV and combi models for Stellantis’ five brands (Fiat, Peugeot, Citroen, Opel and DS).

Tofas would also keep producing Doblo vehicles to July 2023 and Fiorino vehicles to end-2024.

Competition woes

In October 2024, Turkey’s competition board said that Tofas failed to provide sufficient commitments regarding the acquisition of Stellantis Pazarlama.

Under normal conditions, the transaction would not receive a competition clearance as the new entity would be too dominant in the market. However, the competition board will eventually approve it due to Koc Holding’s dominance in Turkey.

Chart: Tofas is already the leader on Turkey’s passenger car market. With the new Stellantis brands, its market share will surpass the 30%-level, based on 2022 and 2023 figures in the chart.

Chart: On the LCV market, Tofas’ share will reach 45%. When Ford Otosan, another Koc unit, is added, Koc Holding will reach a market share of more than 70%.

Chart: Koc’s combined market share of the passenger car and LCV markets will surpass the 40%-level. However, it should also be noted that the impact of Chinese cars, including those of Chery Automobile, is being felt more strongly.  So, Koc’s share may decline by the time of the completion of the acquisition of Stellantis Pazarlama.

One-third capacity utilisation in 2026

In November, Tofas signed the final agreement to produce the new vehicle model K0 LCV and combi versions on multi-energy platforms for Stellantis brands (Fiat, Opel, Citroen, Peugeot).

Accordingly, Tofas is targeting the production of 1mn vehicles under the deal between 2024 and 2032.

Tofas is currently producing fuel and hybrid versions of the Opel/Vauxhall Vivaro (Zafira), Fiat Scudo (Combimix), Peugeot Expert (Traveller) and Citroen Jumpy (Spacetourer).

According to Emre Ozpeynirci (@eozpeynirci), a local automotive journalist, Tofas will produce 90,000 vehicles in 2025 and 150,000 vehicles in 2026 under the deal.

However, given that its Egea contract will expire at end-2025, the company will only use one-third of its 450,000 units of annual production capacity if it cannot strike new contracts.